What are Utility Tokens?

Tokenization is an aspect of blockchain technology that allows the effective transfer of value through the Internet. The fluidity and liquidity created by this concept allow the connectivity of products and services while avoiding location restrictions and breaking the compatibility.

What are Utility Tokens?
A class of token that is growing in popularity and proving to be very essential within the blockchain ecosystem are ‘ Utility Tokens.’ These class tokens exist mainly as accessibility features in the blockchains that they represent. The most exciting concept of these chips is the versatility they provide by revolutionizing existing ideas, creating new ecosystems that empower the participants.

The CEO of Never Stop Marketing, Jeremy Epstein explains to CCN that Utility tokens confer a right on the holder to participate in the network in some way. Such tokens may give the holders the right to use the network and take advantage of their network management and update voting services. For example, a decentralized Uber token may grant you the right to take a ride, and the ARK token gives you the right to vote on the protocol address through your Proof of Delegate Test (DPos). This is different from the security token, where you earn income just by holding.

Single Ecosystem Entities
The function of each particular useful token is determined by the solution offered by its parent blockchain. While Uber tokens give right for a ride and ARK token allow a vote as mentioned above, events planning and management blockchain startup KickCity offers utility tokens that will enable events platforms to plug unto the blockchain protocol. Imaging events platforms like Eventbrite, Ticketmaster and Meetup.com on the blockchain with a reward system that enables effective marketing. These systems will allow event tickets to run out in localized areas with an automated prize system for participants.

According to the CEO of Social , Jade Mulholland, in comparison to other important currencies such as Bitcoin and Ethereum, Utility token has a very important role and, in general, exists only in an ecosystem. Mulholland explains that although Bitcoin is a form of payment or storage value, the utility token can only be used in a platform for basic purposes such as the purchase of goods or services.

Functionality and Value
With blockchain technology, there is a lot of versatility, and that is one of the key reasons why it finds adaptability in almost every aspect of human existence. No matter the specific purpose of a given token, be it for security, equity or utility purposes, it always plays a significant role in establishing the platform which it serves. Therefore in general, tokens can be appreciated as the lifeblood that sustains the parent blockchains.

Galia Benartzi, Co-founder of Bancor explains how FINMA’s recent opinion paper identified three types of tokens – asset, payment, and utility tokens- while acknowledging the existence of hybrid models. According to Benartzi, at their core, utility tokens provide access to a specific application or service (which can be decentralized) or the right to contribute work within a community-owned network. Utility tokens can be staked, or locked under some terms, to gain privileges in an

ecosystem, which creates strong incentives for users to behave.

He describes these tokens as the lifeblood of today’s emerging online economies, motivating and mobilizing participants (including for-profit entities) to collectively provide an integrated set of solutions while sharing the same database, user base, and currency.

Beyond the primary functions of these tokens, they all have the inherent capacity to serve as investment vehicles and elements of transfer of value. This capability is based on the basic economics of demand and supply. Hence platforms that are popular and attract more users naturally find their tokens rising in value within the marketplace. This is the fundamental idea behind speculation and trading within the cryptocurrency market and the volatility that exists therein.

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